Getting private health insurance cover can save you money in the long run when it comes to paying for hefty medical bills. Picture: iStock.

Health

Weighing up private health cover

by Sophie Elsworth

19th Aug 2019 3:40 PM
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THE soaring costs of private health insurance is causing more Australians to drop their cover and rely on the public system.

Premiums climbed by 3.25 per cent on April 1 and despite it being the lowest annual increase in 18 years, for many people private health cover has become unaffordable.

The latest Australian Prudential and Regulation Authority statistics found in the March quarter 44.5 per cent of the population had hospital cover - the lowest level in 12 years.

Today, MoneysaverHQ delves into some of the most important charges you need to factor in before ditching your exisiting cover or signing up for the first time.

1. Hospital and extras

Australians have the choice of signing up to hospital and/or extras cover.

Hospital cover is used when a patient needs to be treated as a private patient in a public or private hospital.

Costs can quickly run into thousands of dollars, so health insurance can help ease the financial burden. Members have to pay an excess if they require a hospital visit and it cannot exceed $750 for singles and $1500 for families.

The number of times you would pay the excess annually depends on the cover and how many hospital visits you make.

The excess is paid directly to the hospital.

Australians can reduce the cost of their private health cover by taking out on insurance with a higher excess.

Medibank chief customer officer David Koczkar said it was important to assess your financial state and prioritise whether cover is essential.

"What's your ability to insure yourself?" he said. "That's linked to your priority to have choice and control of your health and peace of mind.

"Gold, silver, bronze and basic cover makes achieving cover more clear and we have standard categories that allow customers to really understand and compare what they are covered for."

Insurers have started reclassifying hospital cover into these categories to make insurance easier to understand.

Australians aged between 18 to 29 could be eligible for a discount on hospital cover of

2 per cent per year when they first take out cover, to a maximum of 10 per cent.

Extras cover is used to help reduce the cost of expenses such as dental, optical and physiotherapy.

People with extras will usually have a portion of the claim covered and also be left with some out-of-pocket costs.

2. Picking your cover

Working out if you are getting good value from your insurer can be a tough task.

It's well worth visiting the government website privatehealth.gov.au, which compares every health insurance policy available in Australia. Be mindful that other comparison websites do not include every insurer and every policy.

CUA Health's product manager, Harmeet Saini, said people should pick up the phone and speak to insurers.

"Insurers may have some niche products that suit some consumers better than full cover," he said.

"For instance, hospital cover which excludes obstetrics may help save some money.

"Secondly, if you are not anticipating any planned hospital visits you might want to weigh up if you'd be comfortable to increase the excess to your cover to reduce your premium."

Consumers should also remember if they pay for a full year's cover before the annual health insurance price hikes on April 1 each year, they can avoid the annual premium increase.

This can be a big outlay for many households.

Mr Saini said 90 per cent of CUA Health customers paid their cover fortnightly or monthly.

3. Lifetime health cover loading

This is an important consideration for younger Australians because it is a charge designed to get people to take out cover before they turn 31.

From that age, Australians will pay a 2 per cent loading on top of their premium for every year they do not have hospital cover, up to a maximum of 70 per cent.

For instance, if you take out hospital cover for the first time at age 40 your loading on your premium would be 20 per cent more than someone who signed up to it before they turned 31.

Mr Koczkar said this meant "you are much better off if you take out private health insurance earlier in your life".

"Every year after you're 31 it's government policy that insurers will charge you a loading increase on top of the normal premium," he said.

4. Medicare Levy Surcharge

This is a levy paid by taxpayers who do not have private health cover and earn above $90,000 annually for singles and $180,000 for families.

Australians need to consider the Medicare Levy Surcharge which they will be hit with if they earn over a certain threshold and don’t have health cover.

H&R Block director of tax communications Mark Chapman said if you did not have hospital cover you might be stung by the surcharge.

"It's a way of penalising people through the tax system by not taking out private health insurance," he said.

"The theory is if you are wealthy enough to have private health cover you should do that."

The idea is to drive more people to use the private system and reduce the demand for services on the public health system.

CUA Health's Mr Saini said going without hospital cover could cost anywhere between $800 and $2100 extra in tax a year.

"It's best for consumers to shop around to not just receive the tax savings but to find a private hospital cover that provides good cover if you ever need hospital treatment, as well as choice over your medical specialist and hospital," he said.